John Redwood's Diary
Incisive and topical campaigns and commentary on today's issues and tomorrow's problems. Promoted by John Redwood 152 Grosvenor Road SW1V 3JL

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Undermining the UK’s bargaining position

The Supreme Court decision has one obvious impact on the UK. It weakens the government’s attempts to get a renegotiated Agreement with the EU. It has led to the EU casting doubt on the government’s grip on events, and given hope to those in EU councils who argue that hanging tough and playing it long is the best approach for the EU to adopt given the political uncertainties in London.

I confess I have always been sceptical about the ability of the UK to pull a decent Withdrawal Agreement out from the one sided and unfair Agreement Mrs May put her name to. The problems with it are much wider than the backstop, as we often discussed. Part of my reason is so many in the UK establishment seem to be on the EU’s side. I am not, however, in any doubt that there is far more chance of getting an improved Agreement if the UK unites behind its government negotiating team than if opposition forces continue to send every signal to the EU that it will repay them to hold out rather than making sensible concessions.

The opposition focus on the need for an agreement is bizarre. They will not set out the detail of what sort of an Agreement they want. They confuse the Withdrawal Agreement with the Future Partnership Agreement. They deny the existence of various Agreements all ready for an exit without signing the Withdrawal Agreement.

In practice there is no such thing as a No Deal Brexit. There will be a many deals Brexit. There is such a thing as an acceptable Withdrawal Agreement given EU determination. The Opposition both say we need one and then vote it down every time it appears. They seem to be saying they will do everything they can to stop Brexit altogether. They also greatly strengthen the bargaining hand of the EU making it even less likely we will be offered a deal they would vote for.

Constitutional change

The government’s defence yesterday of its action to prorogue Parliament was simple. They thought their actions were entirely legal and based on precedent. This was confirmed by the English High Court. The Supreme Court then decided to create a new legal test over prorogation and change it from being a matter for government and sovereign to decide into a matter than is justiciable under the new rules of prorogation set out by the Court. The government accepts their ability to do this. It will fall to a future Parliament to decide if Parliament wishes to continue with the approach set out by the Supreme Court or if it wishes to legislate to change the approach.

The heart of our constitution rests on a series of checks and balances. Our constitution is written down in various Acts of Parliament, court decisions, the rules or Standing Orders of Parliament and precedents where executive power has traditionally been used. An activist Supreme Court can change our constitution. An Act of Parliament can change our constitution. Executive action can change our constitution, as with the decision to negotiate and enter into the EU Treaties, though these were also subject to confirmatory Acts of Parliament. Parliament often passed them under government guidance that we would be failing to meet out international obligations entered into by the executive at the end of the negotiation if the Bill was not passed.

There is a daily battle between the three elements of the constitution. Parliament regularly criticises the executive and seeks to amend or change its ways. Courts regularly review government decisions and sometimes find them wanting. Government seeks more discretionary power by seeking wide ranging powers in Acts of Parliament, or general approvals of spending with considerable freedom to decide the detail of programmes.

In two wide ranging prerogative areas, the power to declare war and the power to negotiate a treaty, Parliament increasingly asserts its right to approve or prevent the decision . Past great wars have been entered into on the basis of substantial cross party support. Other wars have proved more contentious and have needed Parliamentary majorities with votes.

The battles so far over Brexit have concerned the need for an Act of Parliament to send the letter of notification of withdrawal, and the refusal of prorogation owing to the importance of the Brexit issue. The biggest clash lies ahead. The government claims it has authority to take the UK out of the EU on 31 October. There are two Acts of Parliament to that effect, a referendum vote and the 2017 Election result. It is the government’s job to negotiate a possible new Withdrawal Agreement and to decide on a No deal or a Withdrawal deal exit. Some in Parliament say its European Withdrawal Act No 2 trumps the other two pieces of legislation and expects the Courts to enforce its requirement of the Prime Minister to seek a further delay in our exit. Is it good law to demand a PM to do the opposite of his promises and Manifesto? How are its terms enforceable?

Wither our constitution?

I was surprised to learn reading the Supreme Court text of Lady Hale’s statement about the judgement that “Mr Mark Harper, chief whip” attended a meeting of the Privy Council at Balmoral on 28th August 2019.

I seem to recall Mark Harper ceased to be Chief Whip well before recent events.

I was also interested to read that “During a recess (as opposed to a Prorogation break) written Parliamentary Questions can be asked and must be answered.” When we broke for the last summer recess the Order Paper told us written questions submitted after the last day of session would be tabled and answered when Parliament returned in September.

The Supreme Court argued that Prorogation was different from recess though there are many similarities.

Lady Hale argued that the memorandum from Nikki da Costa which recommended prorogation left out important matters Lady Hale wished to see in it. She stated that the “effect upon the fundamentals of our democracy was extreme”.

Most of us believe in the separation of powers. We need independent judges to judge individual cases and sometimes to interpret Statute and Common Law, and all the time we are in the EU overarching EU law as well. Where Judges use their powers to interpret Statutes in ways Parliament does not like, then Parliament can of course amend the Statute to clarify the intent.

Parliament has more power to decide the law by passing Acts of Parliament and Statutory Instruments, but usually has no power to judge individual cases under the law. Parliaments develop their own relations with the Executive or government which is part of Parliament but also has independent powers to decide and spend beneath a general Parliamentary approval. By convention government proposes new laws to Parliament for Parliament’s approval, amendment or rejection.

The danger of the present situation is no-one is in charge because the government no longer has a Parliamentary majority. We see daily jousting for temporary power or control of the agenda where no-one has the authority that comes from commanding a majority of MPs. The right answer is a General election so the public can decide who they want to govern the country. Instead we have a PM being held hostage by Parliament and Courts who are seeking to force him to do the opposite of what he has promised and believes to be right.

It cannot be the right answer to the big question of whether we remain or leave the EU to have that finally determined in a court of law based on an Act of Parliament rushed through against the wishes of the PM, the government and the majority who voted Leave in the referendum. Acts of Parliament were designed to provide sound and fair law for us all, not to be political traps and political statements against a Prime Minister who has insufficient MPs to endorse his view.

The collapse of Thomas Cook

The Thomas Cook business has been short of cash for much of the last decade, with refinancings to keep it going. At the end it was decided the business was so short of money that it had to go into liquidation. If it had gone into Administration that would have been an expression of more hope of finding a buyer for it as a going concern after some new financial restructuring.

The senior management of the company said their aim was to make it the “most loved holiday company”. I doubt it is today. They wanted to take customers on a journey “from dream to experience”. The experience this week is not quite what customers had in mind. We were told in the last annual report that the “customer” is “at our heart”, and the employees put their ” heart into it”. Now the employees are out of a job.

In the last Report the Directors assured us they had stress tested its future viability as a business for a three year period. They said “the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three year period of the assessment”

The Audit Committee also looked into viability and stated ” there are no material uncertainties as to the Group’s ability to operate as a going concern” drawing on the three year stress tests no doubt.

Finally the auditors wrote “We conclude that the use of the going concern basis of accounting is appropriate and concur with the Directors that no significant uncertainty has been identified”.

Thomas Cook did not short change the senior management when setting salaries and bonuses for them. People will be asking just how did this company fall so far and so fast this year after the positive statements made about it in the last Annual Report?

Flexible working and decent working terms and conditions

I do not think a company should be able to make employees declare they are self employed whilst they work more or less full time for a single employer. Such a device is just a way of avoiding some National Insurance, and cutting out sickness and holiday pay, pensions and other employee benefits. Nor do I like zero hours contracts which require someone to be always available when the employer chooses but not to have flexibility about when they choose to work. I do not like cheap skate employers nor employers who are only flexible for themselves when it comes to hours.

It is important, however, to recognise that there are plenty of flexible employment relationships that work well for both employer and employee.It is important as governments seek to regulate to prevent poor treatment of genuine employees they do not stifle innovation and flexibility in employment models that are  fine for both sides. I have recent cases and recent encounters with people working in flexible ways that reminds me some of these models are good in many ways. I have several complaints about the Inland Revenue trying to make people into employees when they are sure they are independent contractors.

Let’s take a couple of examples. A taxi driver told me he had recently qualified  in  digital technology whilst driving limited hours to pay his bills whilst studying. He wants to continue driving when it suits him, as he is now setting up his own tech business. He wants to be free to meet potential clients when they wish, and to develop the business when he needs to, whilst relying on the driving for a bit longer to pay the domestic bills. He is happy to be a self employed contractor, even if he often gets his taxi passengers from the same source. He does not want to be an employee for fear that then he would have to work when the employer told him to which could conflict with  his new business needs.  

A delivery rider for a pizza firm or food delivery business also wants to be self employed. He may usually get jobs from the same source, but wants to be free to ride for someone else if they have more to offer when he is available or if the rates change. He is paid by the deliveries effected, and does not have to turn up on days or at times when he has something better to do. This is another way people can  study, set up a business, undertake training or develop some new interest whilst being able to pay the bills. No-one makes them do this, and they have the choice to become  full time employees of a firm in a similar line of business.

Many of these models are success stories. Those running them have to negotiate with the Revenue over how far they can go in supporting and backing the drivers or riders before they are said to be their employer. The individuals concerned have to  be careful to take work from more than one, or to keep flexing the hours to show they are not in effect employees. What do you think the rules should say? How can we keep the flexibility this type of work allows, without  it becoming exploitative of relatively low paid people? Where it is a voluntary choice and other options are available,  why should the government try and stop it?

Will a gloomy Treasury try to stop a budget for growth?

My forecasts show that if the UK has a budget soon which confirms the spending increases announced for next year and offers around £12bn of tax cuts, the economy should grow faster next year than this, assuming we leave on 31 October 2019 without signing the Withdrawal Agreement.  As readers have seen, I allowed for some loss of export volume on agricultural exports affected by EU  tariffs, some favourable import substitution on agricultural imports from the EU affected by our tariffs, maintained farm incomes from UK assistance to farms replacing EU, a boost from tax cuts and spending increases to domestic demand and  savings of £12bn on public spending and the  balance of payments  from no more net EU contributions. Overall we could see up to an additional  1% gain of GDP  on the growth rate depending on how far the fiscal reflation goes and depending on whether monetary policy would also be made supportive . Money policy is currently too tight and out of step with relaxations elsewhere in the Euro area, US, China and Japan.

The Treasury and OBR  may want to paint a different picture. I read that they wish to suddenly introduce a £12bn non cash charge as an item of public spending to allow for student loans that may not be repaid. The Student loans scheme was first introduced in 1999 for tuition fees, was beefed up in 2004 when Labour trebled the tuition charge, and increased substantially again when the Coalition after 2010 put through a further trebling  in tuition fees. All the time we have been in the EU seeking to get debt and deficit down in accordance with EU Maastricht criteria the Treasury has not thought it necessary to make early provision for possible loan losses. All of a sudden to coincide with the PM’s stated exit date from the EU they decide they need to introduce an extra spending line item at exactly £12bn, roughly the amount of our net budget contributions to the EU.  If was as if they wanted to say to Leave voters who want to spend that money on our priorities, we will make it vanish away even though  nothing real changes for the student loan scheme the day we leave the EU.

Worse still, the OBR may want to issue economy forecasts that are  pessimistic about growth if we just leave without the Withdrawal Agreement. This would be in line with wildly inaccurate short term Treasury forecasts made during the referendum saying the UK would enter recession in the first few months after voting to leave. Such forecasts would presumably suggest a bigger deficit, claiming that revenue will be down owing to less activity, and benefit spending up owing to more unemployment. Even under  revised deficit control rules it would probably be used as an excuse to argue against the economic boost the economy clearly needs with or without Brexit.

The government needs to argue back. It needs to say that the OBR as an independent forecaster can of course forecast as it wishes, but the government does  not have to rely on a forecast as unreliable as the Treasury 2016 pre referendum forecasts and can point to how wrong they have been in the past. The government should also make the good point that were any OBR pessimistic forecast to be in the right direction it would strengthen the case even more for a stimulus to offset the feared downturn.

The current deficit is under good control. The state can afford to spend the savings on EU contributions and a bit  more. Some of the tax cuts will actually raise more revenue, as some taxes are above the revenue maximising rate.   

Good stewards of the planet

We share our lease on the planet with the rest of mankind during our lives. We should all want to pass it on in better environmental shape when we die. Each one of us can play our part and help use the planet’s natural gifts in a sustainable and good neighbourly way.

Some constituents want to know what I am doing , so let me remind my readers.

I support planting many more trees. I have planted new trees in my constituency in public areas . I support the government’s initiative to have more national forest, and local Council initiatives to have more trees and shrubs  as a counter weight to more development.

I support local planning policies that protect more of our countryside, and wish to see slower rates of development in the next Plan.

I have cut food miles when buying from local shops. I now buy all my temperate foods from local or British sources to cut down lorry, ferry and airfreight transport.

When in London I now walk or use the tube for practically all journeys.

I usually take my holidays in the UK  to avoid jet travel.

I avoid all single use plastic bags.

I use the Wokingham Council recycling facilities. I encourage better control of waste to prevent litter.

I have improved the thermal insulation, heating and heating controls at my home to cut energy use and improve thermal efficiency.

The government states its wish to be the greenest government ever. It should want to do more to extend out forests and areas of natural  beauty, to protect our coast and fishing grounds, to control waste and to promote clean water and air. It should also do more to save energy, improve thermal efficiency and raise environmental   standards  throughout the public sector.

What should a young person do with an inheritance or lottery win?

Let us now turn to wealth held by a few younger people. Let’s consider the limited number of cases of someone who comes into a substantial sum by inheritance, or gift from a rich relative, or from a lottery win or some such. I am not going to consider in this article the profits of successful entrepreneurship by the young person.

Let’s say they receive £500,000. Let’s suppose they have no professional qualifications but did get a first degree in humanities or were educated to A level and now have an office job. Should they

Buy a good quality home with all the money?

Buy a home with part of the money and do something else with the rest?

Should they invest some or all of the cash in developing their own business?

Should they invest the money in shares and build a portfolio? Should they put some of the money into a pension fund?

Should they spend some of the money on training/education?

Tax may play a role in the decision. Putting as much money as possible into an ISA for share investing would provide freedom from income tax and CGT on the investment. Putting money into a pension fund also offers full tax shelter, but it locks the money up for years and a future government might change the rules against you before you can reclaim the cash. Investing in your own business can get you entrepreneurs relief from CGT. Buying a home exposes you to Stamp Duty but frees you from CGT.

The way to increase the young person’s financial position the most would probably be to invest in a successful business for themselves. Given the risks what do you think would be the best course of action? How big a distortion is tax? What kind of a society do we want to be – more lawyers, more landlords or more entrepreneurs? Part of the purpose of these articles is as background to the budget, which presents a good opportunity to change the UK tax system in ways which reward effort, enterprise and saving, and drive faster growth as a result.

Parliament cannot govern

Our constitutional settlement combines the executive with the legislature. Government Ministers have to be Members of Parliament or peers in the Lords. The government executive puts proposals for laws, budgets and treaties to Parliament, and needs to secure a majority for each measure.

The role of Her Majesty’s Opposition in Parliament is to expose government proposals to criticism, seeking to amend and improve them or seeking to vote them down if they are thought to be unacceptable. A wise Opposition also puts forward a constructive alternative, to appear as a government in waiting, a group of politicians capable of governing after an election.

Oppositions usually accept the government’s right to govern, and its right  to secure its major Manifesto proposals approved by the electorate in the last election. Her Majesty’s loyal Opposition does not usually do deals with opponents of our nation, does not undermine the government in an international organisation and does not bad mouth the UK when representing us abroad.

It is particularly important that governments have the power to negotiate treaties and international agreements. It is not something Parliament can do. There are too many different views. Foreign countries would be reluctant to accept an envoy from Parliament other than the government, concerned about the extent to which they could claim to speak for the UK.

It is always the case that Parliament has the ultimate power to vote down a Treaty or international agreement it dislikes. This does not usually arise because the government  normally has a majority it can rely on, or has taken sufficient  soundings to know it speaks for a majority.

It is particularly important when negotiating with the EU that Parliament does not undermine the government’s negotiation. Ruling out leaving without signing the Withdrawal Agreement does undermine the government position, and is particularly bizarre given Parliament’s justified dislike of the Withdrawal Agreement as drafted.

When opposition forces in Parliament say they do not trust the government to conduct the negotiation they do our country harm. Parliament has the power to remove the government if it really does lack confidence in it to negotiate well. It is a clear case of put up or shut up – either sack the government or allow it to conduct the negotiation as it wishes, with Parliament judging the results.

The EU and empires

Mr Verhofstadt  (EU Liberal) warns us that the world is coalescing into empires. He thinks the UK has to join the EU empire as a counter to the Russian, Indian,  Chinese and US empires .

This is not a very liberal outlook. He does not specify why the USA or India is any kind of threat to us, nor why the EU will always get on fine with Russia or China. It leaves out of account the many smaller countries worldwide that do not belong to any of these blocs or major countries and seem to prosper. Australia, New Zealand, Canada, Singapore and many others seem to flourish outside the EU.

I also take issue with him over what is an empire. If empire is based on size and power, let us begin by comparing the UK with Russia. The UK’s economic size is about a third larger than Russia’s. If we look at naval power both countries have one aircraft carrier. Russia has 12 destroyers to the UK’s 6, but only 10 frigates to the UK’s 13. It is true Russia has many more submarines. The UK of course has her potential power greatly augmented by membership of NATO.

An empire is usually  supposed to be a common government system with a single foreign policy and armed forces. It controls a wide range of different territories and former countries or governing units with varying degrees of devolved or delegated authority.  There was the Roman empire covering much of southern and western Europe, the British empire with India at its heart, and the USSR empire stretching through much of eastern Europe and parts of Asia. The UK willingly renounced empire after the second world war, allowing the peaceful establishment of a number of independent nations. The USSR empire was troubled by internal revolts and too passed when the centre allowed free expression. The USA has always opposed the idea of conquest followed by occupation, though it has intervened militarily in support of regime change in various countries. India was created as a separate governing  area from Pakistan, Bangladesh and Sri Lanka on independence.

I find it worrying that a leading exponent of more European integration uses the word “Empire” to explain what they are trying to do. Most of us want no more empires. We believe in the free determination of peoples. Recent votes and campaigns tells us that if people want anything they want smaller governing units, as with the independence movement in Catalonia, the Brexit vote in the UK, the movements for separation in many parts of the world.